Bitcoin or Gold? Do I have to Pick Just One?

Bitcoin or Gold? Do I have to Pick Just One? from Schiff Gold

People seem to enjoy pitting gold and Bitcoin against each other. But do I really have to pick just one?

While cryptocurrency and precious metals have many similarities, in many ways they are polar opposites. And you can have both.

First the similarities.

Both gold and Bitcoin serve as a medium of exchange. They are currencies. They are both decentralized and don’t depend on the good faith and stability of any government to prop them up or give them value.

You can’t create cryptocurrencies or gold out of thin air. You can’t turn on a printing press, or push a button at a central bank to get them. You have to work to “create” both. The mining process may fundamentally different. You mine gold through good-old fashioned manual labor. You mine Bitcoin with a computer. But the principle is the same. Cryptos and precious metals are both inherently scarce.

Gold and Bitcoin also serve similar investment functions. They are both assets. Investors tend to buy them as a safe haven. Both their prices tend to rise during times of crisis.

But fundamentally, gold and cryptos are very different. In fact, as an article published at Business Insider points out, they are polar opposites. Bitcoin is nothing but computer code. You can’t put it in your pocket or wear it around your neck. If the power goes out, or the internet goes down – poof – Bitcoin disappears in the blink of an eye. Gold is a physical thing.

You can pick it up and feel its satisfying weight in your hand. It can’t be altered. Gold is gold. Once I own it, that’s it. I don’t need to rely on a functioning internet. I don’t need a computer. It’s pure, tangible value.”

Gold is also the old kid on the block. It has served as currency for thousands of years. But gold has inherent value beyond the fact it is money. People around the world prize it for jewelry, and it is increasingly being used in technological applications from medicine, to electronics, to energy production.

Gold is also easy for the average person to understand. It’s a metal. It’s pretty. You dig it out of the ground. Bitcoin – well, that gets a little more complicated.

Bitcoin isn’t easy to explain to the average guy on the street. The fundamentals of blockchain, and the distributed ledger systems upon which bitcoin is built, are not straightforward. It usually takes time and effort for people to really understand just how much of an innovation bitcoin really is when it is a trust-less mechanism for exchanging value. Most people simply can’t comprehend bitcoin and the blockchain.”

Here’s the bottom line: no matter how big Bitcoin gets, no matter how high its value skyrockets, it will never be gold.

The Business Insider article quoted a guy on a cryptocurrency thread.

I prefer a currency that has survived 5,000+ years of wars, empires, the rise and fall of countries, cold spells, hot spells, and has been universally accepted in every country of the world.”

Think about it. If you had to make a $1 million bet on which would be around in 100 years, and you had to just pick one, would you choose gold or Bitcoin?

But Bitcoin does have its advantages. There is no doubt a lot of people have made a lot of money over the last year or so. Bitcoin is easy to hold and trade. You don’t have to have a vault to store it in, or a dolly to move it. Because it’s not a physical object, governments can’t confiscate it.

You can cross national borders with bitcoin in your possession on a USB-stick device, a piece of paper… or if you can memorize your private key, with no physical object in your possession of any kind.”

So – what do you choose?

You Don’t Have to Choose

With Bitcoin and precious metal advocates squaring off against each other in contentious debates, we’ve developed this dynamic where people feel like they have to take a side. You’re either a gold guy or a crypto guy. You love one and hate the other. You buy one and scorn the other. But do you really have to choose just one?

I’m a musician. I have both an electric guitar and an acoustic guitar. Like Bitcoin and gold, my two guitars are very similar, but also fundamentally different. I used them both in different ways. But the thing is – I have both.

People would look at me like I had horns if I started running around saying, “You should only have an electric guitar. You should never buy an acoustic guitar.” That’s just silly.

Maybe we should start looking at cryptos and precious metals in a similar way. We can have both. We can value both. In fact, maybe we should have both. After all, diversification is one of the fundamentals of investing. You would never put all your money in one stock, or one bond, or one commodity.

The Business Insider article put it this way:

So gold and bitcoin both deserve a place in your portfolio. Gold has stood the test of time and is a medium of storing value. Bitcoin’s time, on the other hand, is just beginning. Blockchain is the future, and when you have an opportunity to buy the future and tuck it away, you should take it.”

Buying gold and silver is a great way to diversify your portfolio. You can even buy gold and silver with Bitcoin. In the world of investing, it’s never wise to put all of your eggs in one proverbial basket. Diversifying your cryptocurrency portfolio with precious metals can help mitigate some of the potential downsides and put you in an overall stronger financial position.


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Peter Schiff

Mr. Schiff began his investment career as a financial consultant with Shearson Lehman Brothers, after having earned a degree in finance and accounting from U.C. Berkeley in 1987. A financial professional for more than twenty years, he joined Euro Pacific in 1996 and served as its President until December 2010, when he became CEO. An expert on money, economic theory, and international investing, he is a highly sought after speaker at conferences and symposia around the world. He served as an economic advisor to the 2008 Ron Paul presidential campaign and ran unsuccessfully for the U.S. Senate in Connecticut in 2010.